Dive Brief:

• Citi has agreed to a racial equity audit, to be conducted by the law firm Covington & Burling, to evaluate the bank’s $1 billion 2020 commitment to address the racial wealth gap in the U.S., the bank said in a blog post Friday.
• The investigation comes after a sizable minority of Citi shareholders voted in support of a racial equity audit during the bank's annual stockholders’ meeting in April.
• Financial institutions such as BlackRock and Morgan Stanley have likewise agreed to racial audits, while others such as Goldman Sachs have resisted calls for such investigations.

Dive Insight:

Citi launched its $1 billion Action for Racial Equity (ARE) initiative in September 2020 to combat the racial wealth gap and exclusionary financial practices in the U.S. In the wake of the police killings of George Floyd and Breonna Taylor, several Wall Street banks such as Bank of America and U.S. Bank collectively pledged billions to help fight racial inequality.

Citi's ARE aims to provide greater access to banking in communities of color, increase investments in Black-owned businesses and grow homeownership rates among Black Americans.

At a bank shareholder meeting, SOC Investment Group filed a resolution urging the board of directors to oversee an audit investigating the bank’s racial equity initiatives. “Citi has a conflicted history when it comes to addressing racial justice within the community it serves,” the resolution said, adding that the COVID-19 pandemic has exacerbated the adverse impacts of Citi’s policies on communities of color.

Citigroup asked regulators to block the proposal, Bloomberg reported, although the appeal was ultimately denied.

The bank's mixed track record on civil rights includes a $25 million fine from the Office of the Comptroller of the Currency (OCC) in 2019 for violating the Fair Housing Act. The OCC said the bank failed to provide mortgage discounts to some eligible borrowers, which adversely affected people of color.

Ahead of the 2021 stockholders’ meeting, Citi urged shareholders to reject the racial equity audit. However, a large minority of shareholders — 38% — voted in favor of the proposal. A similar proposal by Goldman Sachs shareholders garnered 29% approval.

Six months later, Citi has made an about-face and agreed to conduct a racial equity audit.

“By agreeing to a third-party racial equity audit, Citi is taking a critical step toward confronting centuries-old harms against marginalized communities that are still present to this day,” SOC Investment Group's executive director, Dieter Waizenegger, said in the blog post. “We look forward to partnering with Citi to address these concerns to pave the way for a financial industry that understands entrenched racial inequity, changes the way it conducts business, and invests in the communities it serves to close the racial wealth gap.”

Covington & Burling conducted a similar civil rights assessment of Starbucks, and published a report in 2019.

“Conducting an audit of our ARE initiative will help us assess the impact our work is having and will help inform how to adapt and grow our work to address the racial wealth gap,” Edward Skyler, Citi's head of global public affairs, said in the post. “Engaging with our shareholders is an important part of how we continue to evolve and strengthen our Environmental, Social and Governance practices, and we're confident the dialog we've begun with SOC will strengthen our work to help address the racial wealth gap."